This bull market is now 10 years old. It is the longest lasting bull market in the history of the US financial system. So, from a purely time based perspective, the likelihood of a continuation of this bull market is becoming increasingly unlikely. Although, it's existence and subsequent resilience is purely a result of over five trillion dollars in quantitative easing, which was unprecedented in itself. Regardless, the technical similarities to 2008 are very convincing for the argument that the top is in, and that an earth shattering bear market is likely to ensue.
The has rolled over , just below powerful resistance (red horizontal trendline,) and the has reversed from the oversold level. So, the underlying strength indicators are rolling over, as the market struggles at the top of this and lateral overhead resistance. In my opinion, a sharp reversal candle on high will be a powerful conformation to the aforementioned sell signals.
From a fundamental standpoint, you have to realize that earnings per share ( EPS ) growth has already peaked. Additionally, the market is CLEARLY acting extraordinarily negatively, to tiny 0.25% interest rate hikes. Folks, understand one thing, when a market like this, can't handle 0.25% rate hikes, while rates are at historic lows (only 2.5%) we have a MAJOR problem. Not to mention an inversion of the yield curve, economic pressure from the trade war (although a trade deal is already priced in) severely over-leveraged corporate debt, problems in Europe, such as Brexit issues, problems in Italy and France, and general economic tension in the Eurozone.
And what can the Fed do this time!? Cut interest rates? Reverse course? QE4? Interest rates are only at 2.5%! In 2007, the federal funds rate was 5.25% — more than double its current level. That means the Fed has little adjustment space to jump-start the economy again, despite the fact that the market is dramatically higher than it was in 2008. Furthermore, they already have a heavily inflated balance sheet , well in the trillions. So, they are increasingly powerless, to rescue this market (THAT THEY INFLATED) when it starts to collapse. And what will happen then? Corporations will default on the debts they are over levered against. There will be widespread corporate bankruptcies, and we could be looking at an EPIC debt crisis as a result. That introduces the possibility that bond yields could collapse. Particularly, if we fall into a recession, that the Fed is unable to rescue us from. Bond yields would be in very dangerous territory, if China, Japan, and others were forced to sell US treasuries, to protect their own economies from economic turmoil. That would cause bond yields to plummet, because they would obviously not sell those bonds at a AAA rating, and then interest rates would skyrocket, causing the $22Trillion federal deficit to skyrocket, far surpassing GDP. That would literally cause the Fed to lose control of rates. Sound far fetched? I can assure you that it isn't.
This stuff may not happen immediately, but the stage is set. How can the damage be reversed? We are living in an artificially inflated economy, and the debt crisis that looms in the background is going to usher in the greatest financial crisis that humanity has ever witnessed. That's my opinion, and it is well justified. Do you realize that we have $116Trillion in US unfunded liability debt? $116 TRILLION! Don't believe me? Visit usdebtclock. org and see for yourself. Those numbers are generated directly from the Federal Reserve . Our unfunded liability debt is equal to 77% of the value of our national assets. That includes our military, our infrastructure, our intellectual property, our aerospace industry, our medical industry, tech, everything that America owns, is $149Trillion. We have a major, major problem, when debt accounts for 77% of our national assets. It may not happen immediately, but this thing WILL collapse. The Fed may kick the can down the road, and try to lower rates and start QE4, but they'd just be further inflating the greatest bubble of all time. I hate to be the bearer of bad news, but this is a very serious economic risk. That said, the risks that I have defined are my OPINION. I do not condone or suggest any financial reactions to this statement of my opinion.
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***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***